The long term funding problems faced by Social Security are not unique to Social Security.
It’s now becoming clearer that many private and public sector pension plans that millions of Americans have trusted to save for retirement are on the same slippery slope as Social Security.
The latest sign of these pension fund breakdowns is a proposed 55% benefit cut to retirees who are part of the Central States Pension Fund.
After working 33 years, he’s facing a 55% cut to his pension benefits, a blow which he says will “cripple” his family and imperil the livelihood of his two children, one of whom is in the fourth grade and one of whom is just entering high school.
Dorsey attended a town hall meeting in Kansas City on Tuesday where retirees turned out for a discussion on “massive” pension cuts proposed by the Central States Pension Fund, which covers 400,000 participants, and which will almost certainly go broke within the next decade.
“A controversial 2014 law allowed the pension to propose [deep] cuts, many of them by half or more, as a way to perhaps save the fund,” The Kansas City Star wrote earlier this week adding that “two much smaller pensions also have sought similar relief under the law, and still more pensions are significantly underfunded.”
“What’s happening to us is a microcosm of what’s going to happen to the rest of the pensions in the United States,” said Jay Perry, a longtime Teamsters member.
Public sector pensions like those in Houston and the state of Illinois are also facing fiscal crisis. Illinois just missed a $560 million payment to its fund and GM just had to sell bonds to make a pension fund payment.
Central States Pension Fund is facing a much more near term funding problem.
To be sure, retirees’ frustrations are justified. That said, the fund is simply running out of money. “We simply can’t stay afloat if we continue to pay out $3.46 in pension benefits for every $1 paid in from contributing employers,” a letter to retirees reads.
The fund is projected to go broke by 2026. Without the proposed cuts, no benefits at all will be paid from that point forward.
According to letters shared with The Star, cuts range from around 40% to 61%. “[The] average pension loss was more than $1,400 a month,” the paper says.
What is happening to Central States Pension Fund and the Illinois public sector pension fund is an early preview of what is going to happen to Social Security. Social Security will still pay benefits but at a much reduced rate after the trust Fund is exhausted and the number of current workers is unable to support current retirees.